China Trade’s Diverging Paths

Two roads diverged in a wood, and I – I took the one less traveled by

– Robert Frost, “The Road Not Taken”

For much of the past decade, China’s exports to the United States and the European Union (EU) moved together. Although China’s export share to the U.S. rose notably above the export share to the EU during the pandemic, the two series reconverged through 2023 and into early 2025. Since the beginning of 2025, however, the paths have diverged sharply: Europe’s share has held steady in the midteens while the U.S. share has fallen to a new low.

From 2022 through early 2025, the two series were nearly indistinguishable. China’s exports to the U.S. and EU, measured as a share of China’s total exports, tracked almost perfectly. That link is insightful because it strips out many of the usual macroeconomic explanations, including growth, inflation, supply chain rerouting and changes in China’s export mix.

The divergence aligns closely with shifts in trade policy. The U.S., under a new administration, introduced a substantial expansion of tariffs on Chinese goods, raising costs and prompting rapid adjustment in trade flows. Europe, by contrast, adopted a more targeted approach. The EU imposed tariffs on certain Chinese products in late 2024 – most notably duties of up to 35.3% on electric vehicles – but did not undertake a sweeping tariff overhaul comparable to U.S. measures. In addition, Europe did not experience a sudden drop in demand nor did China experience a major change in competitiveness. As a result, the U.S.’ share of China’s exports fell while Europe’s held firm.

Such divergence reframes the common narrative around “decoupling.” Much of the focus is often on a broad, global shift away from China. But trade data points to something more specific: U.S.-China decoupling is accelerating, whereas Europe – and many other parts of the global economy – remain tightly linked to China’s export machine. For investors, this suggests that the impact of trade policy will be regionally uneven rather than globally uniform.

While the immediate trade adjustment is concentrated in the U.S., policies that increase friction in global trade tend to have broader and less visible effects over time, particularly through supply chains, pricing and capacity rather than headline trade volumes.

Sometimes the most important trade stories are not found in headline announcements but in how export shares quietly separate after years of moving together, revealing where trade pressure ultimately lands.

Between the Lines is a weekly blog by DoubleLine Portfolio Managers Sam Garza, Joseph Mezyk and Quant Analysts Fei He, CFA and Sunyu Wang that breaks down topical macro and market issues. For questions or suggestions please e-mail us at betweenthelines@doubleline.com. The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of DoubleLine Capital LP, its affiliates or employees.